City gas is a clean energy that produces almost no pollution during combustion. In addition, it boasts higher thermal efficiency and versatility than other fuels such as coal briquettes, while ensuring stable supply from numerous gas reserves around the world.
Supplying City Gas to the Greatest Number of Citizens at the Lowest Price
Highest City Gas Penetration Rate in Korea
Seoul Metropolitan Government began providing city gas in February, 1980. At present, city gas is being supplied through five city gas providers, and the city gas penetration rate in Seoul is 96.8% as of 2014, the highest in the country. Back in 1980, Seoul provided city gas to a mere 260,000 households, but the figure jumped to 700,000 households (21% penetration rate) in the 1990s, and the penetration rate exceeded 90% after 2000. As of the end of 2013, city gas is being supplied to 4 million households, 15 times jump from 3 decades ago, and the penetration rate stands at 96%.
Offering the Lowest Price Nationwide
The retail price of city gas is set by adding supply costs (5%) to natural gas import price (95%).
Average retail price = wholesale price (cost of raw material) + retail supply costs (gas company)
Wholesale price of city gas (cost of imported raw material) varies depending on the cost of natural gas import price. Meanwhile, to determine the retail price of city gas, the total production cost incurred by each city gas provider which is equal to the cost of production plus the reasonable return on investment is first calculated. After the total production cost of all five providers are added up, it is divided by the sales volume to come up with the retail price.
High population density and solid pipeline infrastructure cuts the production cost for city gas providers, which in turn lowers the gas bills for the final users. As a result, Seoul boasts the lowest retail price of gas in the country. Based on average annual gas use per household (691m3=30,059MJ), Seoul residents pay KRW 740,000, which is KRW 117,000 cheaper than the bills paid by the residents in Yeongdong region, which is known for the highest gas price in the country.
Improving City Gas Service to Better Serve Ordinary Citizens
In January, 2014, Seoul city government revised the regulations on the provision of city gas in order to improve the service quality. The revisions include alleviating burdens shouldered by economically disadvantaged families, expanding user convenience, and addressing loopholes identified in the regulations governing the supply of city gas.
Reducing Late Payment Penalty for Economically Disadvantaged Families
Seoul Metropolitan Government announced the revised regulation governing the provision of city gas in January, 2014. Under the revised regulation, the maximum late payment penalty is reduced from 10% to 4% to reduce the financial burdens of the economically disadvantaged groups of citizens. In addition, city gas users no longer need to pay initial deposits or commission for termination of service subscription (KRW 2,200). Such commission was paid by users who wished to receive city gas after the service was terminated in the past. The aforementioned revisions were made to reduce the financial burden shouldered by ordinary citizens who may end up having to pay unpaid gas bills, late payment penalty, and termination commission all at once.
Increasing the Interest Rate on Refund of Overpayment Arising from Inaccurate Reading
In the past, for refunding overpayment, the interest rate of regular savings account was applied. However, the regulation has been revised to apply the interest rate of a one-year fixed deposit account, which is slightly higher than the previous. Meanwhile, clauses on compensation for damages and price discounts for gas leak have been added. Clauses on compensation for damages stipulate what kind of compensation the user can receive in case damages arise from the suspension of gas supply due to the provider’s fault. Price discounts for gas leak is provided when there is a gas leak due to damages in the gas pipes, malfunction of the boilers, or other reasons not attributable to the user. In such cases, the price discount will be determined based on the gas bill in the previous month or that of the same month in the previous year.
Giving Advance Notice Regarding the Supply Termination Date
In the past, when city gas supply was expected to be terminated due to late payment, the provider simply needed to give an advance notice 5 days prior to the supply termination date. However, the city government made revisions requiring service providers to send an advance notice to the service via SMS, phone, letter, and etc. The notice should include the reason for termination and the termination date.